The oil market had quite a bit of news that you would normally expect to have a price boosting effect. Opec+, among others, made an attempt to boost the market. However, negative sentiment took over and this week is on track to close lower compared to last week.
Last week Brent crude oil closed above $93 per barrel. This week, however, the price took a big step back. On Wednesday, September 7, Brent oil fell to $87,68 per barrel. It is the first time since January that the price has closed below $90 per barrel. The price of Brent oil has now risen again. Yesterday (September 8) the market closed at $90,72 per barrel.
Opec+ tried to assert its power this week. The Saudi prince and oil minister Abdulaziz bin Salman previously hinted in veiled terms that Opec might cut production. According to the prince, this would be necessary to reduce the role of speculators in the oil market. It came as a surprise to many analysts that Opec+ actually decided in its monthly meeting this week to cut oil production by 100.000 barrels per day in October. Opec+ wants to send a clear signal that the cartel wants to maintain the oil price at current levels, despite the threat of a global recession. The reduction itself does not amount to much. The reserve capacity is already largely in use in the vast majority of countries. These countries are having the greatest difficulty filling September's quota, which has increased by 100.000 barrels per day compared to August.
The nuclear deal with Iran has been canceled for the time being. Top US officials have told the Israeli prime minister 'that no agreement will be reached in the foreseeable future on resuming the 2015 deal.' Israel is a declared opponent of the nuclear deal because the country fears that Iran will develop a nuclear weapon. Oil from Iran is now finding it difficult to find its way onto the world market due to Western sanctions. Resuming the deal would ease access and the large supply of oil from Iran would put pressure on prices.
Economy
Despite these developments, which normally have a price-raising effect, the oil market is in a downturn. The central banks' interest rate increases apparently have a greater effect on the market. The US has been working on this for some time and FED Chairman Jerome Powell once again emphasized that getting inflation under control is a top priority. This week the ECB also took action with the largest interest rate increase since the bank's existence.
Furthermore, developments surrounding corona in China also play a role. China's strict lockdowns are expected to put a brake on oil demand. There have basically been enough bulls in the oil market. However, the market has not made a leap upwards. According to some analysts, this is a sign that the price could fall much further in the near future.
The diesel price initially rebounded this week. Finally, diesel took a step back in the last few days. The fact that oil and diesel are somewhat out of step is due to the strong demand for diesel on the European market. The EU, led by Germany, has made itself very dependent on energy from Russia, according to experts. Most attention is paid to gas, but Russia is also an important supplier of oil and fuel. And especially now that gas is difficult to obtain, there are several players who want to keep diesel as a reserve fuel.